EmpirIcal Study Of Credit Risk Based On The Revising Z-score Model And KMV Model

Credit risk means that creditors’ economic loss of possibility by the debtors when they refuse or are unable to pay the debts on time and in full as their previous agreement. It will not only affect people’s daily lives, company’s normal business management, but also affect national and globle financial stability. China’s capital market financing system is based on bank financing for indirect financial intermediaries for a long time, and the development of direct financing system has been relatively lagged,due to market-oriented economic and unperfect financial laws and regulations of China, the bond market’s high credit risk lag is particularly prominent. Events of default mainly caused by financial distress in recent years such as Hailong, Xinzhongji, Chaori, Huarui have been seriously affected the stability of China’s bond market, not precciseness or missing of credit risk measurement in this series of events ha ve not shirk responsibility.Credit risk measurement is a key means of creditors for credit rating, as well as an important basis for a country’s credit risk management. As the credit risk measurement research process of scholars, it can be summarized as the traditional credit risk assessment methods based on qualitative analysis from the 1970 s and the rapid developed moderm credit risk measurement models based on quantitative analysis from the late 1990 s. The traditional credit risk assessment methods mainly include expert method, credit rating method and credit scoring method. The modern credit risk measurement models are widely used by banks, mainly include Credit Metrics model, KMV model, Credit Risk+ model and CPV model, etc.Study samples selected in this paper are 41 listed companies in the financial data and stock data as large credit risk samples choosed from all 99 companies who’s 2013 annual corporate bond subject ratings were downgraded in the rating agencies’ reports in the early 2014, and another paired undowngraded 41 listed companies according to total assets and industries as small credit risk samples, the financial data of all 82 samples is complete and the samples contain A shares only.The main work of this paper includes 3 points. First of all, revising Altman’s Z-score model according to the actual situation of China’s bond market, to replace a original financial ratios variable of Z-score model and entrant a new variable representatived the main business profitability yields, the empirical study shows that the revised Z-score model for credit risk discrimination rate has been greatly improved over the original Z-score model. Second, revising the default point calculation of non-current liabilities of KMV company’s KMV model, the empirical study founds that the coefficient is taken as 1.0 will be the appropriate and the new model for credit risk discrimination rate has a small improvement. Finally, to combine the rivised Z-score model and KMV model, add ing the DD of the rivised KMV model to the rivised Z-score model to form a new linear model named ZKMV, the empirical study shows that the new model is higher than the previous two rivised model for credit risk discrimination rate, thus we get the optimal credit risk measurement model for the listed companies who’s corporate bond subject ratings were downgraded.